PROJECT REPORT
“A STUDY ON APOLLO TYRES.LTD, KALAMASSERY”
SUBMITTED BY
ATHUL.C.A
15P35H0239
UNDER THE GUIDANCE OF
Ms. NIVIYA FESTON
SENIOR ASST. PROFESSOR
NEW HORIZON COLLEGE
MASTERS OF BUSINESS ADMINISTRATION
BHARATHIAR UNIVERSITY
COLLEGE CODE: KA 11 B 131
2015-17
STUDENT’S DECLARATION
I hereby declare that this project entitled A STUDY ON WORKING CAPITAL MANAGEMENT AT APOLLO TYRES.LTD, KALAMASERY was prepared by me during the year 2016-17 and was submitted in partial fulfillment of the requirements for Master Degree in Business Management of Bharathiar University.I also de clare that this project report is original and genuine and has not been submitted to any other university of the award of any degree, diploma or other similar titles or purposes.
DATE: ATHUL C A PLACE: bangalore 15P35H0239
GUIDE CERTIFICATE.
This is to certify that the project report entitled A STUDY ON WORKING CAPITAL MANAGEMENT AT APOLLO TYRES.LTD , KALAMASSERY submitted by ATHUL C A bearing registration number 15P35H0239 to Bharathiar University for the partial fulfillment of Master Degree in Business Management is an outcome of genuine research work carried under my guidance and it has not been submitted for the award of any other degree, diploma or prize.
DATE: PLACE:Bangalore Ms.NIVIYA FESTON
HOD CERTIFICATE
This is to certify that ATHUL C A bearing registration number 15P35H0264 is a bonafide student of this college. The project work entitled A STUDY ON WORKING CAPITAL MANAGEMENT AT APOLLO TYRES.LTD ,KALAMASSERY is a work carried out by him/her for partial fulfillment of the requirements for Master Degree in Business Management of Bharathiar University during the year 2016-17 .It is certified that all corrections/suggestions have been incorporated in the project report and a copy is deposited in the department library. This project work has been approved as it satisfied the academic requirement of Master Degree in Business management .
DATE:
PLACE: Bangalore DR. SHEELANMISRA
PRINCIPAL’S CERTIFICATE
This is to certify that ATHUL.C.A bearing registration no. 15P35H0239 is a bonafide student of this college. The project work entitled A STUDY ON WORKING CAPITAL MANAGEMENTAT APOLLO TYRES.LTD ,KALAMASSERY is a work carried out by him/her in partial fulfillment of the requirements for Master Degree in Business Management of Bharathiar University during the year 2016-17
DATE:
PLACE: Bangalore Dr . R.BODHISATVAN
ACKNOWLEDGEMENT
I wish to pledge and reward my deep sense of gratitude for all those who have made this project come alive.
I would like to express my heart-felt gratitude to Dr. SHEELAN MISRA, Head of Department of Management Studies, New Horizon College for her valuable suggestions and moral support throughout the course of my project.
I am gratefully indebted to my internal faculty guide, Ms. NIVIYA FESTON, Asst. Professor, Department of Management Studies, New Horizon College, for encouraging me and for his constant support throughout the course of the project and helping me complete it successfully.
A special note of gratitude goes to my external guide Mr. MANEESH M S , Head – HR, APOLLO TYRES Ltd. for providing me an opportunity to work in this corporate exposure and for his support and guidance in this endeavor.
I wish to thank all the people who have helped me to work on my project. I finally thank my family and friends for their constant support and guidance.
ATHUL C A CHAPTER CONCEPT PAGE NO. CHAPTER 1 INTRODUCTION 01-10 1.1 Meaning 01 1.2THEOROTICAL 02 CONCEPTS 1.3 APPROACHES TO 07 MANAGING WORKING CAPITAL 1.4 TYPES OF WORKING 07 CAPITAL 1.5 PRINCIPLES OF 08 WORKING CAPITAL 1.6 METHODS OF 10 ESTIMATING WORKING Chapter 2 INDUSTRY AND 11-21 COMPANY PROFILE 2.1 INDUSTRY PROFILE 11 2.2 COMPANY PROFILE 15 2.3 PRODUCT PROFILE – 21 APOLLO TYRE BRANDS Chapter 3 RESEARCH DESIGN 27-29 3.1 Meaning 27 3.2 RESEARCH 27 APPROACH 3.3 Tools of Data Analysis 27 3.4 Statement of Problem 28 3.5 Objectives of the Study 28 3.6 Scope of the Study 28 3.7 Limitations of Study 28 3.8 Period of study 29 3.9ANALYSIS OF 29 WORKING CAPITAL CHAPTER 4 RATIO ANALYSIS 30-70 4.1 MEANING 30 4.2 STATEMENT OF 34 CHANGES IN WORKING CAPITAL 4.3 TREND ANALYSIS 35 4.4 ANALYSIS AND 36 INTERPRETATION CHAPTER 5 FINDINGS SUGGESTIONS 71-75 CONCLUSION 5.1 FINDINGS 71 5.2 SUGGESTIONS 74 5.3 CONCLUSION 75 BIBLIOGRAPHY ANNEXURE
LIST OF GRAPHS
SL. NO. PARTICULARS PAGE NO. 2.1 Major domestic players their market share 14 2.2 Share holding period 17 RATIO ANALYIS 4.1 Net working capital 36 4.2 Current ratio 38 4.3 Quick asset ratio 39 4.4 Absolute liquid ratio 41 4.5 Cash ratio 43 4.6 Inventory turnover ratio 44 4.7 Inventory holding period 47 4.8 Debtors turnover ratio 48 4.9 Average collection period 51 4.10 Creditors turnover ratio 52 4.11 Average payment period 55 4.12 Working capital turnover ratio 56 4.13 Current asset turnover ratio 59 4.14 Net profit ratio 60 TREND ANALYSIS 4.15 Trend analysis of expected sales 68 4.16 Trend analysis of expected profit 70
LIST OF TABLES
SL. PARTICULARS PAGE NO. NO. 2.1 Board of Directors of Apollo Tyres Ltd. 18 2.2 Management board of Apollo Tyres Ltd. 19 Ratio Analysis 4.1 Net working capital 36 4.2 Current ratio 38 4.3 Quick asset ratio 39 4.4 Absolute liquid ratio 41 4.5 Cash ratio 43 4.6 Inventory turnover ratio 44 4.7 Inventory conversion period 45 4.8 Debtors turnover ratio 46 4.9 Average collection period 48 4.10 Creditors turnover ratio 50 4.11 Average payment period 52 4.12 Working capital turnover ratio 54 4.13 Current asset turnover ratio 56 4.14 Net profit ratio 60 Analysis on the basis of schedule of changes in working capital 4.15 2011-12 62 4.16 2012-13 63 4.17 2013-14 64 4.18 2014-15 65 4.19 2015-16 66 Trend Analysis 4.20 Trend analysis of net sales 67 4.21 Trend analysis of expected sales 68 4.22 Trend analysis of profit 69 4.23 Trend analysis of expected profit 70
CHAPTER I
INTRODUCTION
CHAPTER II
INDUSTRY PROFILE
CHAPTER III
RESEARCH DESIGN
CHAPTER IV DATA ANALYSIS AND INTERPRETATION
CHAPTER V
FINDINGS SUGGESTIONS AND CONCLUSION
BIBLIOGRAPHY
ANNEXURE Working capital management Apollo Tyres Ltd
1.INTRODUCTION
1.1 Meaning
Working Capital Management is significant in financial management due to the fact that it plays a vital role in keeping the wheel of the business running. Every business requires capital, without which it cannot be prompted. It holds exceptional importance in the case of a manufacturing company. This study is undertaken to find out the efficiency and effectiveness of the working capital management in the company and to provide useful feedbacks.
Apollo Tyres Ltd. is one of the largest tyre manufacturing companies across the world. The company started its production of tyres way back in the year 1977, it holds the 2nd position in India and 14th position in the world. The company currently has 9 plants in India, South Africa and Zimbabwe. Apollo Tyres exports its products to Africa, the Middle East, South America, Asia-Pacific and Europe.
This Project Titled ‘A Study On Working Capital Management At Apollo Tyres Ltd.’ is a deliberate and systematic endeavor to study the working capital management system in the Indian tyre giant.
Under this study, analysis has been done for the last five years from 2011-2012 to 2015-2016. Various secondary sources like annual report of the company, journals, theoretical text, publications in web, financial inputs from the management staff etc. were utilized to undertake the study. The study is mostly made from the financial analysis tools like ratio analysis, cash conversion cycle, schedule of changes in working capital position etc. The limitation may reflect in the result of this study also.
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Working capital management Apollo Tyres Ltd
The study tries to compare the working capital management in the company and other competitors in Indian market to know the efficiency and shortcomings of the system. Analysis has been done by comparing the industrial ratio with the ratios recorded by the company. This project also tries to study about the components in the current asset to know the level of consistency over the years.
From the study it is clear that the overall working capital management system is very efficient paring few drawbacks. The company showed high consistency in most of the areas of working capital and also met the industrial average and even surpassed them in some cases. It is found that the company’s performance in some areas is commendable and in few area require more attention.
The company should rectify the shortcomings in its working capital management system with utmost care to achieve global standards and thereby becoming Benchmark Company in this particular sector.
1.2 THEOROTICAL CONCEPTS
Working capital is a financial metric which represents operating liquidity available to a business, organization or other entity, including government entry. Along with fixed assets, working capital is considered a part of operating capital. Gross working capital equals to current assets. Working capital is calculated as current assets minus current liabilities. If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit.
A company can be endowed with assets and profitability but short of liquidity if its assets cannot readily be converted into cash. The management of
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Working capital management Apollo Tyres Ltd working capital involves managing inventories, accounts receivable payables, and cash.
Decisions relating to working capital and short-term financing are referred to as working capital management. These involves managing the relationship between a firm’s short-term assets and its short-term liabilities. The goal of working capital management is to ensure that the firm is able to continue its operations and that it has sufficient cash flow to satisfy both maturing short- term debt and upcoming operational expenses.
1.2.1 AIMS OF WORKING CAPITAL MAANGEMENTS
1. The goal of WCM is to manage firm’s current assets and current liabilities in such a way that a satisfactory level of working capital is maintained to meet the short term obligations as and when they arise.
2. A significant objective of WCM is to ensure short term liquidity and to see that probability is not affected by the way the current assets and current liability is managed.
3. The main theme of WCM is the interaction between the current assets and current liabilities and arrive at the optimum level of both.
4. Tradeoff between profitability and risk: In evaluating a firm’s NWC position, an important consideration us the tradeoff between probability and risk. The risk of becoming technically insolvent is measure by assuming greater the amount of NWC, less risk prone the firm is. Or, the greater the NWC, greater the liquidity of the firm and therefore, less likely it is to be insolvent. Covertly lower levels of NWC and liquidity are associated with increasing levels of risk. The relation between liquidity, NWC and risk is such that if either NWC or liquidity increases, the firm decreases.
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5. Apart from the profitability, risk-tradeoff, another important ingredient of the theory of working capital management is determining the financing mix. Financing mix refers to the proportion of current asset that would be financed by current liability and by long term resources.
6. Tradeoff: If a firm wants to increase its profit, it must also increase its risk inversely, if it decreases risk, its profitability too tends to decreases. The tradeoff between the variables is that regardless of how the firm increases its profitability through the manipulation of working capital, the consequence is a corresponding increase in risk as measured by the level of net working capital.
1.2.2 CONCEPTS OF WORKING CAPITAL
There are two concepts of working capital,
Gross Working Capital: According to this concept gross working capital refers to the company’s outlay in current assets. Current assets are those assets which can be transformed into cash during an accounting period and comprise cash, short-term securities, receivable, loan & advance and inventory. Net Working Capital: According to this concept, net working capital refers to the difference between current assets and liabilities. Current liabilities are those claims of outsiders, which are likely to be paid with in a financial year and usually comprise creditors, bills payable, bank loans and outstanding expenditures. NWC may be positive or negative. When the current assets are in excess of current liabilities the positive working capital arise and when current liabilities are in excess of current assets negative working capital arises
Net Working capital= Current Assets – Current Liabilities
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1.2.3 IMPORTANCE OR ADVANTAGES OF ADEQUATE WORKING CAPITAL
The importance and advantages of adequate working capital are as follows
Solvency of the company: Efficient working capital helps in solvency of the company by continuous flow of production.
Reputation: Adequate working capital enables a company to disburse timely payments and therefore, helps in creating and keeping reputation. Unproblematic loans: Company having sufficient working capital, high solvency and excellent credit position is able to get loans from banks and other sources on friendly and constructive terms. Cash discounts: Adequate working capital further more enables a company to get benefit of cash discounts therefore, it reduces costs. Uninterrupted delivery of raw material: Adequate working capital assures uninterrupted receipt of raw material. Uninterrupted disbursement of salaries wages and other day-to- day obligations: A company which has sufficient working capital will be able to make disbursement of salaries, wages and other obligations which raise the spirit of its employees, increase effectiveness, decrease wastage, saves cost and increase profit. Utilization of positive market conditions: A company which has sufficient working capital can utilize positive market situations such as procuring its necessities of material in bulk when the price are low and by holding its inventories for privileged prices. Capability to face crisis: Sufficient working capital makes a company able to face business crisis in emergencies such as depression for the
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reason that during such periods, generally, there is much burden on working capital. Sky-scrapping morale: Sufficiency of working capital makes an
atmosphere of safety, confidence, high morale and creativeness in a
company, on the whole.
1.2.4 DISADVANTAGES OF EXCESSIVE WORKING CAPITAL
Every company ought to have sufficient working capital to operate its business activities. It ought to contain neither redundant nor insufficient working capital. However, out of the two, it is the insufficiency of working capital, which is more hazardous from the point of view of the company.
When there is an excessive working capital it possibly will lead to the needless procurement and buildup of inventory attracting more probability of burglary, waste losses. Redundant working capital implies too much debtors and faulty credit practices which may create elevated occurrence of bad debts. It may lead to incompetency of the company, as a whole. Owing to less rate of return on funds the worth of shares may as well decrease. The excessive working capital may raise speculative transactions.
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1.3 APPROACHES TO MANAGING WORKING CAPITAL
Two approaches are normally adopted by the companies for the management of working capital:
Conventional Approach: According to this approach the individual constituent of working capital should be managed competently and cost- effectively as a result of which there are neither redundant sources nor scarcity of sources. Generally much importance is prepared to the management of receivables since these normally comprise the major chunk of the outlay in working capital.Operating Cycle Approach: According to this approach working capital is viewed as a function of the quantity of operational expenditure. As per this approach the working capital is ascertained by the period of the operating cycle and the operating expenditure required for finishing the cycle. The period of the operating cycle is the number of days consumed at different levels, beginning with acquiring of raw materials to the receipt of money from debtors.
Most of the companies usually go after the conventional approach previously, but in these days the practice is changing in favor of the operating cycle approach. The banks generally use this approach whilst giving credit services to their customers.
1.4 TYPES OF WORKING CAPITAL
The working capital can be classified into two:
1. Fixed working capital
2. Fluctuating working capital
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Fixed working capital
The necessity for current assets is connected with the operating cycle, which is an uninterrupted course of action. As such, the requirement for current assets on the other hand may not all the time be same. However, there is a definite minimum level of current all the time, which is necessary for the company to maintain in its business irrespective of the level of business activities. This is the fixed minimum level necessary for keeping the flow of the current assets. This minimum level of investment is everlastingly blocked up in business and is for that reason called as permanent or fixed or regular working capital.
Fluctuating working capital:
Requirement for working capital, over and above the fixed working capital, will rise and fall in relation to variations in production and sales of the company. The requirement for working capital may also differ on account of cyclic variations, irregular and unexpected situations. AN increase in the price possibly will lead to an increase in the volume of funds invested in stock of raw materials in addition to finished products.
Extra quantum of working capital may possibly be needed to face aggressive contest in the market or other emergencies like strikes and lockouts. The additional working capital required to face the fluctuating business activities is called fluctuating or variable working capital.
1.5 PRINCIPLES OF WORKING CAPITAL
Principle of Risk Variation: This principle assures that a relation exists between the degree of risk that the firm assumes and the rate of return i.e. the more risk assumed, the greater is the opportunity for gain and loss. Principle of Equity Position: According to this principle the amount of working capital invested in each component should be adequately
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justified by a firm’s equity position. Every rupee invested in working capital should contribute to the net worth of the firm. Principle of Cost of Capital: This principle emphasizes that different sources of finance have different cost of capital. It should be remembered that the cost of capital moves inversely with risk. Thus, additional risk capital results in decline in the cost of capital. Principle of Circulation: In a genuine management of working capital, the cycle of working capital should be minimum. In other words, the circulation of working capital should be minimum period. The shorter the period of circulation, the more peculiar is the management of working capital. Principle of Liquidity: In determination of firm’s liquidity the proportion of net working capital and liquid funds play a more important role than that of inventory. Principle of Maturity of Payment: The grater the disparities between the maturities of firm’s short term debt investment and its flow of internally generated funds, greater the risk and vice versa. Principle of Adequacy: Firm’s which manage adequate working capital, always earn higher profit than the firms, which fail to manage adequate working capital.
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1.6 METHODS OF ESTIMATING WORKING
CAPITAL REQUIREMENTS
Percentage of Sale Method: This method of estimating working capital requirement is based on the assumption that the level of working capital for any firm is directly related to its sales value. If past experiences indicates a stable relationship between the sales and working capital, then this basis may be used to determine the requirement of working capital forfuture.Regression Analysis Method: This method of forecasting working capital requirement is based upon the statistical technique of estimating or predicting the unknown value of a dependent variable from the known value of an independent variable. It is the measure of the average relationship between two or more variables, i.e.; sales and working capital, in terms of the original units of the data. Cash Forecasting Method: This method of estimating working capital requirement involves forecasting of cash receipts and disbursements during a future period of time. Cash forecasting will include all possible sources from which cash will be received and the channels in which payments are to be made so that a consolidated cash position is determined. Operating Cycle Method: This method of estimating working capital requirements is based upon the operating cycle concept of working capital. The cycle stars with the purchase of raw material and other resources and ends with the realization of cash from the sales of finished goods.
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2. INDUSTRY AND COMPANY PROFILE
2.1 INDUSTRY PROFILE
2.1.1 HISTORY OF TYRE
The most important application of rubber relates to the transport sector of which tyre industry consumers over 60% of the total rubber produced. After the invention of wheel by Sumerians 5000 years ago it was refined over the ages. In the year 1845, R W Thompson invested the predecessor of the pneumatic tyres of the modern age. From there, the tyre industry has grown as one of the largest industries in the world. A tyre is a ring shaped vehicle component that covers the wheel’s rim to protect it and enable better vehicle performance. Most tyres, such as those for automobiles and bicycles, provide traction between the vehicle and the road while providing a flexible cushion that absorbs shock. The materials of modern pneumatic tyres are synthetic and rubber, natural rubber, fabric and wire, along with carbon black and other chemical compounds. They consist of a thread and a body. The thread provides traction while the body provides containment for a quantity of compressed air. Before rubber was developed, the first version of tyre were simply bands of metal fitted around wooden wheels to prevent wear and tear. Early rubber tyre were solid. Today the majorities of tyre are pneumatic inflatable structures, comprising dough-nut shaped body of chords and wires encased in rubber and generally filled with compressed air to form an inflatable cushion. Pneumatic tyres are used on many types of vehicles, including cars, bicycles, motor cycles,
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Working capital management Apollo Tyres Ltd buses, trucks, heavy equipment and aircraft. Metal tyres are still used on locomotive and railcars, and solid rubber tyres are still used in various non- automotive applications, such as some casters, carts, lawn movers. The manufacturing of automobile tyres as an ancillary for the development of automobile sector came into being in India during 1930’s when the Dunlop India Ltd. the first tyre manufacturing transactional company started its operation in1935 at Sahaganj in West Bengal.
2.1.2 INDIAN SCENARIO
The domestic tyre industry is estimated to have grown by 10%-12% during 2015-1016, supposed by 7%-7.5% growth in OEM and 12%-15% growth in the replacement segment. ICRA expects the tyre industry to report a growth of 4%-8% over the next 3 years. After recording a sequential annual decline of 5.5% during the period 2012-2015, grew by a sharp 19% in 2015-16 led primarily by surge in 2W tyres. It is expected that he rising trend of imports to continue over the near term. The anticipated spike in T&B imports in 2015-16 with the February-15 sunset of the erstwhile Anti-Dumping Duty on T&B imports is also expected to dive imports. Exports on the other hand, de-grew by 3% to 4%, especially in Africa and parts of Asia. ICRA expected 4%-5% de-growth in tyre exports from India during 2015-16. That said, the levy of preliminary ADD US on Chinese tyres may provide some opportunities for Indian tyre export scenario. The industry is currently experiencing one of the best periods recording sharp expansion in profits driven by low input costs. Crude linked derivatives such as synthetic rubber, carbon black and rubber chemicals too, despite rising traded lower in line with crude oil prices. However, it is expected that depleting NR stock and demand driven inflation to lead to higher inputs costs over the
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Working capital management Apollo Tyres Ltd next 12-18 months which would lead to correction in profit margins to more sustainable levels. Over the years, MRF has been the dominant player in the country by virtue of its strong product capabilities apart from focused branding efforts backed by a deep distributions network panning across India and steady exports. However, several players have challenged its market share in recent years through prudent brand management backed by sizeable investments in product development/capacities.
For the fiscal 2015-2016, the industry recorded a 6.9% YoY revenue growth 0following 5.8% growth in the preceding fiscal. With the decline in NR prices, the industry wide operating and net margins expanded by 50bs each to
14.3% and 6.4% respectively. Industry capital structure improved to 0.6X in
March 2015 while on the coverage front, interest coverage improved from 5.9x to 6.9x and total debt to OPBDITA improved from 1.9x to 1.7x for the same period under comparison.
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2.1.3 MAJOR DOMESTIC PLAYERS AND THEIR MARKET SHARE FY 2015-16
MAJOR DOMESTIC PLAYERS MARKET SHARE
MRF CEAT BRIDGESTONE FALCON METRO APOLLO BALKRISHNA GOODYEAR ATC JK TYRES BIRLA TVS SRICHAKRA RALSON
Source: IRCA Research Report
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2.2 COMPANY PROFILE
Apollo Tyres Ltd. (ATL) was incorporated on 28th September, 1972 as a Public Limited Company and obtained Certificate of Commencement of Business on October 24 1972. The company was promoted by Bharat Steel Tubes Ltd. Raunaq International Pvt. Ltd., Raunaq & Co. Pvt. Ltd.,
Raunaq Singh, Mathew T. Marattukalam and Jacob Tomas.
Apollo Tyres Ltd. with its corporate headquarters in Gurgaon, India, is in the business of manufacture and sale of tyre since its inception in 1972. Over the years, the co. has grown manifold, establishing its footprints across the globe.
The company has manufacturing units in India and Netherlands. It is also setting up a new manufacturing facility in Hungary, with a planned investment of $475 million. The company markets its products under its two global brands – Apollo and Vredestein, and its products are available in over 100 countries through a vast network of branded, exclusive and multi-product outlets.
At the end of its financial year on March 31 2016 Apollo Tyres had clocked a turnover of US$ 2.08 billion, backed by a global workforce of approximately 16000 employees.
Apollo Tyres Ltd. is traded in India on the BSE and NSE, with 56% of shares held by public, Govt. entities, banks and financial institutions as of March 31, 2016.
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2.2.1Vision and Values
Vision
A significant player in the global tyre industry and a brand of choice, providing customer delight and continuously enhancing stakeholder value.
Values
Customer First Business Ethic Care for Society Empowerment Communicate Openly One Family
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Share Holding Pattern as on 31.03.2016
Sales
Promoters Financial institutions/ Banks/ Mutual Funds Govt. of Kerala/ KSIDC NRIs/ Body Corporate etc. Public
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BOARD OF DIRECTORS
Table 2.1
Onkar S Kanwar Chairman & Managing Director Apollo Tyres Ltd. Neeraj Kanwar Vice Chairman & Managing Director Apollo Ltd. Dr. S Narayan Former Principal Secretary to the Prime Minister of India Arun Kumar Purwar Former Chairman SBI Robert Steinmetz Former Chief of International Business Continental AG Ms. Pallavi Shroff Partner, Shardul Amarchand Mangaldas & Co. Nimesh N Kampani Chaiman, JM Financial Group Sunam Sarkar Director, Apollo Tyres Ltd.
Akshay Chudasama Partner, Shardul Amarchand Mangaldas & Co. P.H. Kurian IAS Principal Secretary Department of Industries & IT Govt. of Kerala Vikram S Mehta Former Chairman Shell Group Of Companies General Bikram Singh (Retd.) Former Chief of Indian Companies
Seema Thapar Company Secretary Apollo Tyres Ltd. Vinod Rai Ex-Comptroller and Auditor General of India Francesco Gori Director Apollo Tyres Ltd.
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MANAGEMENT BOARD
Table 2.2
Onkar S Kanwar Chairman & Managing Director Apollo Tyres Ltd. Neeraj Kanwar Vice Chairman & Managing Director Apollo Tyres Ltd. Robert Steinmetz Former Chief of International Business Continental AG P K Mohamed Director, Apollo Tyres Ltd. Robert Steinmetz Former Chief of International Business Continental AG Satish Sharma President, APMEA, Apollo Tyres Ltd. Marco Paracciani Chief Marketing Officer Apollo Tyres Ltd. Sunam Sarkar Director, Apollo Tyres Ltd. Gaurav Kumar Chief Financial Officer, Apollo Tyres Ltd.
Peter Snel Chief, R&D PV, Apollo Tyres Ltd.
Markus J Korsten Chief Manufacturing Officer Apollo Tyres Ltd. Matias Heimann President, EA, Apollo Tyres Ltd.
K Prabhakar Chief, Projects, Apollo Tyres Ltd.
Martha Desmond Chief HR Officer, Apollo Tyres Ltd.
Pedro Matos Chief Quality Officer, Apollo Tyres Ltd.
Francesco Gori Director Apollo Tyres Ltd.
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Apollo Tyres Offices
Corporate Headquarter
Apollo House, 7 Institutional Area, Sector 32, Gurgaon 122001, India
Registered Office
Apollo Tyres Ltd. 3rd floor, Areekal Mansion, Panampilly Nagar, Kochi 682036, Kerala, India.
Manufacturing Locations
India
Kalamassery
Perambra
Baroda
Abroad
Zimbawe
South Africa
Regional Hubs
Dubai
Thailand
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2.3 PRODUCT PROFILE – APOLLO TYRE BRANDS
When Apollo Tyres was established in1972, it was a single brand enterprise. Over the years, as the organization grew and expanded its footprint across geographies, several brands either joined or were born into its fold. Today, the company owns 5 key brands – Apollo, Kaizen, Maloya, Regal and Vredestein.
While brands Apollo and Vredestein comprise of tyres across categories - from passenger and commercial vehicle to off highway tyres, the remaining 3 brands are more product category specific. Regal and Kaizen focus on the truck-bus tyre segment while Maloya continues to operate within the passenger vehicle tyre category.
Each brand from the company is equipped with its own distinctive visual language and targeted at a specific customer need. This approach has enabled Apollo Tyres to provide a wide range of products for various applications, across geographies – ending with a delighted customer.
Brands - Apollo
Driven by attention to safety, Apollo tyres are manufactured in India and are available across almost all categories, including commercial and passenger vehicles, farm and industrial.
The core idea behind brand Apollo is safety. At all times Apollo is willing to travel that extra mile to deliver what its stakeholders need. Apollo enables individuals to maximize their own potential, as reflected in its tagline
“gothedistance”Brand Apollo Tyres’ genesis dates back to the mid-1970s, when the first corporate identity was unveiled. It stood for passion, aggression and determination to achieve excellence in all spheres. Popularly known as the unending road, the logo mirrored the long journey the company would make for NEW HORIZON COLLEGE Page 21
Working capital management Apollo Tyres Ltd its evolution as a synamic, multi-cultural and multi-location entity. This identity served Apollo’s dream and ambition for over 30 years.
Brands – Vredestein
With a heritage older than 100 years, brand Vredestin’s unique story is best captured through its tagline “Designed To Protect You”, which is also its brand promise. A Winning combination of Dutch dedication and Italian elegance, Vredestin is best known for its premium high performance passenger vehicle tyres, especially in the winter tyre segment.
Moreover, it offers a wide array of equally exclusive and performance driven tyres for the agriculture, industrial and bicycle categories. Manufactured out of a state-of-the-art facility in Enschede, in The Netherlands, its products are sold largely in the aftermarket. Vredestin tyres can be found adorning a whole range of luxury vehicles across the European Union, the US, the Middle East and China.
Products
Passenger Vehicles
Car Tyres
Alnac Alnac 4G Alnac 4Gs Amazer 3G Amazer 3G Maxx Amazer 4G Amazer 4G Life Amazer XL
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VAN Tyres Amazer XL Quantum
SUV Tyres
Amazer 4G Life Apterra AT Apterra HL Apterra HLs Apterra HP Apterra HT
Commercial Vehicle
Heavy Commercial Vehicle Tyres
Amar Amar AT-RIB Amar DLX Amar Gold Cargo Miler Cargo Plus XR Champion DXL Champion Gold ENDURACE MD+ Endurace CD Endurace HA Endurace LD
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Endurace LDR Endurace MA Endurace MA731 Endurace RA Endurace RA1 Endurace RD Endurace HA Loadstar Super Loadstar Super Gold Loadstar Super XP Lug Miler Minelug ST-5 XMR XT-1 XT-100K XT-7 XT-7 GOLD+ XT-7 Gold XT-7 Haulug XT-9 XT-9 Gold
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Small Commercial Vehicle Tyres
Amar DLX Amar Gold Cargo SL
Light Commercial Vehicle Tyres
Amar DLX Amar Gold Loadstar Super XP Milestar XT-7 gold+ XT100 Xmr
Off Highway Tyre
Farm Tyres
AGREX 85 Bhim Dhruv FX 515 FX 515 (Row Crop) FX 525 Farmking Krishak Gold Krishak Gold (Steer Krishak Premium
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Working capital management Apollo Tyres Ltd
Krishak Premium (Steer) Krishak Premium CR Krishak Super Pivot Powerhaul
Industrial & Construction
AIT 416 AIT 426 ALT 118 ARC 317 ARG 217 ASR 614 ASR 624 AWE 713
Earth Mover Tyres
ALT 188 ALT 188 TX AWL 822
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Working capital management Apollo Tyres Ltd
3.RESEARCH DESIGN
3.1 Meaning
Research design used for the study was descriptive analysis type and it involves observation of ideas from the standard texts and journals, websites and other related materials to get a hold on the theories.
3.2 RESEARCH APPROACH
This research assesses the overall working capital management of the company taking into account the financial data for the accounting period of last 5 years. Ratio analysis, Cash Conversion Cycle, Schedule of Changes in working capital is used for this purpose.
Formulation of research problem
The research problem in this project is to study the investment of the firm in the working capital, whether they are reasonable, in other words, is the firm over or under invested in working capital.
Period of study
A Study on Working Capital Management was done in Apollo Tyres Ltd. as per the given period of time from June to July 2016
3.3 Tools of Data Analysis The tools used for the study are Ratio Analysis, Cash Conversion Cycle, Trend Analysis and Schedule of changes in working capital.
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Working capital management Apollo Tyres Ltd
3.4 Statement of Problem
A Study on working capital management was undertaken by researcher to analyze liquidity, profitability, and solvency position of the company. In order to find out liquidity ratio, current ratio quick ratio and absolute ratio are used. In order to find out profitability we used net profit ratio.
3.5 Objectives of the Study:
a) Primary Objective
To study the working capital management of Apollo Tyres Ltd.
b) Secondary Objectives
To assess the impact of working capital on Profitability To analyze the liquidity position of the company To know the effect of change in working capital To find out the management of current assets and current liabilities. To assess the impact of working capital on profitability.
3.6 Scope of the Study
This study assess the working capital investments, evaluates working capital investments and working capital components of Apollo Tyres Ltd.
3.7 Limitations of Study
The study is based on secondary data drawn from the secondary sources connected to the topic. So errors are possible. And the study only covers the accounting period of last five years and current year was excluded on account of non-availability of data. So the current year position of the firm was not taken into consideration.
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Working capital management Apollo Tyres Ltd
3.8 Period of study The period covered for the completion of the project is 1 month, from 27th June 2016 to 27th July 2016.
3.9 ANALYSIS OF WORKING CAPITAL
Analysis is the process of critically examining in detail accounting information given the financial statement. For this purpose individual items are studied and their inter relationship with other related figures are established. It is treated in a way so as to offer a full diagnostics of the profitability and financial positions of the concerned firm.
The analysis of working capital can be conducted through a number of devices such as:
a) RATIO ANALYSIS b) FUNDFLOW ANALYSIS c) TREND ANALYIS
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Working capital management Apollo Tyres Ltd
4.RATIO ANALYSIS
4.1 MEANING
Ratio analysis id a powerful tool of financial analysis. It is a process of comparison of one figure against other, which makes a ratio and the appraisal of the ratios to make proper analysis about the strength and weakness of the firm’s operations and stand for the process of determining and presenting the relationship of items and groups of items in the statements.
Various working capital ratios are as follows:
a) Net Working Capital
An analysis of the net working capital will be very helpful for knowing the operational efficiency of the company.
NET WORKING CAPITAL= CURRENT ASSETS-CURRENT LIABILITIES
b) Current Ratios
It express the relationship between the total current assets and current liabilities. It indicates the availability of current assets in rupee for every one rupee of current liabilities.
CURRENT RATIO = CURRENT ASSETS CURRENT LIABILITIES
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Working capital management Apollo Tyres Ltd
c) Acid test ratio/ quick ratio/ liquidity ratio
This ratio establishes a relationship between quick/liquid assets and current liabilities. It measures the firm’s capacity to pay off current obligations immediately. This ratio is also known as acid test ratio. The standard quick ratio 1:1 is considered satisfactory.
QUICK RATIO = QUICK ASSETS CURRENT LIABILITIES
d) Absolute Liquid Ratio
It may be defined as the relationship between Absolute liquid assets and current liabilities. Absolute liquid assets include cash in hand and cash at bank. The standard ratio is 0.5:1.
ABSOLUTE LIQUIDITY RATIO = ABSOLUTE LIQUID ASSET CURRENT LIABILITIES
e) Cash Ratio
The cash ratio is a liquidity ratio that measures a firm’s ability to pay off its current liabilities with only cash and cash equivalents. No other current assets can be used to pay off current debts.
CASH RATIO = CASH & BANK BALANCE CURRENT LIABILITIES
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Working capital management Apollo Tyres Ltd
f) Inventory Turnover Ratio
Inventory turnover is the ratio, which indicates the number of times the stock is turned over. This measures the efficiency of the sales and stock levels of a company.
INVENTORY TURNOVER RATIO = NET SALES CLOSING INVENTORY
g) Inventory Holding Period
It measures the average time taken for clearing the stocks. This indicates that how many days’ inventories take to convert from raw material to finished goods.
INVENTORY HOLDING PERIOD = DAYS IN A YEAR INVENTORY TURNOVER RATIO
h) Creditors/Accounts Payables Turnover Ratio
Creditor’s turnover ratio is the ratio, which indicates the number of times the debts are paid in the year.
CREDITORS TURNOVER RATIO= NET PURACHASES AVERAGE CREDITORS
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Working capital management Apollo Tyres Ltd
i) Creditors Repayment Period
Represents the average number of days taken by firms to repay the debts.
AVERAGE PAYMENT PERIOD= DAYS IN A YEAR CREDITORS TURNOVER RATIO
j) Debtors/Accounts Receivables Turnover Ratio Indicates the speed of debt collection of the firm. This ratio computes the number of times debtors has been turned over during the period. DEBTORS TURNOVER RATIO= NET SALES (CREDIT) AVERAGE DEBTORS
k) Debtors Collection Period
Debtors collection period measures the quality of debtors since it measures the rapidity or slowness with which money is collected from them. AVERAGE COLLECTION PERIOD= DAYS IN A YEAR DEBTORS TURNOVER RATIO
l) Working Capital Turnover Ratio
Indicates the number of times the working capital is turned over in the course of year.
WORKING CAPITAL TURNOVER = NET SALES NET WORKING CAPITAL
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Working capital management Apollo Tyres Ltd
m) Current Asset Turnover Ratio
Current assets turnover ratio shows the relationship between net sales and current assets. CURRENT ASSET TURNOVER= NET SALES CURRENT ASSETS
n) Net Profit Ratio It shows relationship between net profit after tax and net sales. NET PROFIT RATIO= NET PROFIT AFTER TAX NET SALES 4.2 SCHEDULE/STATEMENT OF CHANGES IN
WORKING CAPITAL
It is prepared in order to measure the increase/ in the working capital over a period of time. This schedule is prepared with the help of only current assets and current liabilities. Compare each current asset in previous year, with that in current year. Similarly, compare each current liability in the previous year with that in the current year. The decrease difference is recorded for each individual current asset and current liability. The two columns showing the changes in current assets and current liabilities are balanced. Increase in Current Assets and Decrease in Current Liabilities. The acquisition of current assets and repayment of current liabilities will result in funds out flow. The funds may be applied to finance an increase in stock, debtors etc. or to reduce trade creditors, bank overdraft etc. Decrease in Current Assets and Increase in Current Liabilities. Short term funds raised during the period by any increase in the current
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Working capital management Apollo Tyres Ltd liabilities like trade creditors, bank overdraft and tax dues, means that these sources have more at the end of the year than at the beginning.
4.3 TREND ANALYSIS
In trend analysis, the changes are calculated for several successive years instead of two or three years. It is based on the idea that what has happened in the past gives an idea of what will happen in the future.
One of the main goal of trend analysis is to forecast future values of the series. It allows a researcher to look at a pattern of change over a long period of time rather than at a single discrete point in time or over a short time so that better conclusion can be drawn.
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Working capital management Apollo Tyres Ltd
4.4 ANALYSIS AND INTERPRETATION
1. Net Working Capital Net Working Capital = Current Assets- Current Liabilities
Table4.1 Net working Capital
Years Current Assets Current Liabilities Net Working Capital INR Mn INR Mn INR Mn 2011-12 18208.07 12219.56 5988.51 2012-13 18401.34 21516.7 -3115.36 2013-14 17351.90 17931.65 -579.75 2014-15 20483.46 22545.34 -2055.88 2015-16 20187.51 20897.53 -710.02 Source: Table 4.1 Annual Report
Net Working Capital
5988.51
2011-12 2012-13 2013-14 2014-15 2015-16 -579.75 -710.02 -2055.88 -3115.36
Graph 4.1
Interpretation: From the graph it is clear that the working capital of the firm is showing a sudden decrease and it is on account of availing a short term loan
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Working capital management Apollo Tyres Ltd which has resulted in the increase of current liabilities. Significant decrease in current asset is because of decrease in value of inventories and the decrease n current liabilities is because the firm has paid back the major portion of their loan in the period 2013-2014
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Working capital management Apollo Tyres Ltd
2. Current Ratio Current Ratio= Current Assets- current Liabilitie
Table4.2 current Ratio
Years Current Assets Current Liabilities Current Ratio INR Mn INR Mn INR Mn 2011-12 18208.07 12219.56 1.49
2012-13 18401.34 21516.7 0.86
2013-14 17351.90 17931.65 0.97
2014-15 20483.46 22545.34 0.91
2015-16 20187.51 20897.53 0.97
Source: Table4.2
Current Ratio 1.49
0.97 0.97 0.86 0.91
2011-12 2012-13 2013-14 2014-15 2015-16
Graph 4.2
Interpretation: The ideal current ratio is to be 2:1. i.e. current assets should be twice current liabilities. None of the above years have ideal current ratio, hence the firm should focus on optimizing the current ratio. The trend was showing a downward slope till 2011-12 an there after slowly improving its position
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Working capital management Apollo Tyres Ltd
3. Quick Asset Ratio
Quick Ratio= Quick Assets/Current Liabilities
Table 4.3 Quick ratio
Years Quick Assets Current Quick Asset Ratio INR Mn Liabilities INR Mn INR Mn 2011-12 18208.07 12219.56 0.56
2012-13 18401.34 21516.7 0.34
2013-14 17351.90 17931.65 0.34
2014-15 20483.46 22545.34 0.34
2015-16 20187.51 20897.53 0.40
Source: table 4.3 Quick Ratio
Quick Asset Ratio 0.56
0.4 0.34 0.34 0.34
2011-12 2012-13 2013-14 2014-15 2015-16
Graph 4.3
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Working capital management Apollo Tyres Ltd
Interpretation: An acid test ratio of 1:1 is considered satisfactory as a firm can easily meet all its current liabilities. If the ratio is less than 1:1 then the financial positin of the company shall be improved
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Working capital management Apollo Tyres Ltd
4. Absolute Liquid Ratio Absolute Liquid Ratio= Absolute Liquid Assets/Current Liabilities
Table 4.4 Absolute Liquid Ratio
Years Absolute Liquid Current Liabilities Absolute Liquid Ratio Ratio INR Mn INR Mn INR Mn 2011-12 4801.93 12219.56 0.39
2012-13 3648.04 21516.7 0.17
2013-14 3412.28 17931.65 0.19
2014-15 5247.09 22545.34 0.23
2015-16 5135.55 20897.53 0.25
Source: table 4.4
Absolute Liquid Ratio
0.39
0.25 0.23 0.19 0.17
2011-12 2012-13 2013-14 2014-15 2015-16
Graph 4.4
Interpretation: By analyzing the ratio we can see that the absolute liquid ratio of the firm is less than the standard ratio. From 2012 there is a decrease in the
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Working capital management Apollo Tyres Ltd absolute liquid ratio . In 2010-13 there is the lowest absolute liquid ratio.From the year 2012-13 there is an increase in absolute liquid ratio
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Working capital management Apollo Tyres Ltd
5. Cash ratio Cash Ratio= Cash and Bank Balance
Current Liabilities
Table4.5 Cash ratio
Years Cash and Bank Current Liabilities Cash Ratio INR Mn INR Mn INR Mn 2011-12 1412.63 12219.56 0.12
2012-13 1155.93 21516.7 0.05
2013-14 1541.92 17931.65 0.09
2014-15 2211.1 22545.34 0.10
2015-16 2078.4 20897.53 0.10
Source: Table 4.5cash ratio
Cash Ratio
0.12
0.1 0.1 0.09
0.05
2011-12 2012-13 2013-14 2014-15 2015-16
Graph 4.5
Interpretation: Standard cash ratio is 0.5:1 and the company’s cash management can be further improved. The cash ratio of the company is showing an improving trend from 2011-12 onwards. NEW HORIZON COLLEGE Page 43
Working capital management Apollo Tyres Ltd
6. Inventory Turnover Ratio Inventory Turnover Ratio= Net Sales
Closing Inventory
Table 4.6 Inventory Turnover Ratio
Years Net Sales Inventories Inventory Turnover Ratio INR Mn INR Mn INR Mn 2011-12 54904.86 11363.34 4.83
2012-13 81578.75 11114.17 7.34
2013-14 85074.91 11208.26 7.59
2014-15 86100.8 12836.92 6.71
2015-16 88782.68 11851.86 7.49
Source: Table 4.6
Inventory Turnover Ratio 7.59 7.34 7.49 6.71
4.83
2011-12 2012-13 2013-14 2014-15 2015-16
Graph 4.6
Interpretation: From the graph it is clear that firm’s inventory management can be further enhanced. A high inventory turnover maybe the result of very low NEW HORIZON COLLEGE Page 44
Working capital management Apollo Tyres Ltd level of inventory . The turnover will also be high if the firm replenishes its inventory in too many small lot size . The situation of frequent stock outs and too many small inventory replacement are costly for the firm. Thus, too high and too low inventory ratio shuld be investigated further.
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Working capital management Apollo Tyres Ltd
7. Inventory Holding Period Inventory Holding Period = Days in year
Inventory turnover ratio
Table 4.7 Inventory Holding Period
Years No of Days in a year Inventory Turnover Period (in Days) INR Mn Ratio INR Mn INR Mn
2011-12 365 4.83 76
2012-13 365 7.34 50
2013-14 365 7.59 48
2014-15 365 6.71 54
2015-16 365 7.49 49
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Working capital management Apollo Tyres Ltd
Source: Table 4.7
Inventory Holding Period 76
54 50 48 49
2011-12 2012-13 2013-14 2014-15 2015-16
Graph 4.7
Interpretation:
Inventory coversion period shows that how many days’ inventories take to convert from raw material to finished goods. The inventory conversion period is showing a decreasing trend and it depicts the efficiency of management to convert the inventory into cash
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Working capital management Apollo Tyres Ltd
8. Debtors Turnover Ratio Debtors Turnover Ratio= Net Sales (credit)
Average Debtors
Table 4.8 Debtors Turnover Ratio
Years Net Credit Sales Average Debtors Debtors Turnover INR Mn INR Mn Ratio INR Mn 2011-12 54904.86 1709.12 32.12
2012-13 81578.75 2840.97 28.72
2013-14 85074.91 3185.25 26.71
2014-15 86100.8 2712.76 31.74
2015-16 88782.68 2802.72 31.68
Source: Table 4.8
Debtors Turnover Ratio
32.12 31.74 31.68 28.72 26.71
2011-12 2012-13 2013-14 2014-15 2015-16
Graph 4.8
Interpretation: This ratio discusses the credit collection power and policy of the firm. The higher the ratio the better is, since it would indicate that debts are
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Working capital management Apollo Tyres Ltd being collected promptly. The ratio is showing a growing trend which is a positive sign
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Working capital management Apollo Tyres Ltd
9. Average Collection Period Average Collection Period= Days in a year
Debtors turnover ratio
Table 4.9 Average Collection Period
Years No of days in Debtors turnover Period (in days) a year ratio INR Mn INR Mn INR Mn 2011- 365 32.12 11.36 12
2012- 365 28.72 12.71 13
2013- 365 26.71 13.67 14
2014- 365 31.74 11.50 15
2015- 365 31.68 11.52 16
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Working capital management Apollo Tyres Ltd
Source: Table 4.9
Average Collection Period
13.67 12.71 11.36 11.5 11.52
2011-12 2012-13 2013-14 2014-15 2015-16
Graph 4.9
Interpretation: The average collection period measures the quality of debtors and it helps in analyzing the efficiency of collection efforts. Higher collection period is in the year 2013-2014. Lowest collection period is in the year 2011-12. It shows the firm hasn’t a liberal credit policy.
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Working capital management Apollo Tyres Ltd
10.CreditorsTurnoverRatio Creditors turnover ratio= Net Purchases (creditors)/Average
Creditors table4.10 Creditors Turnover Ratio
Years Net Credit Average Creditors Creditors Purchases INR Mn Turnover Ratio INR Mn INR Mn 2011-12 42290.82 8475.99 4.99
2012-13 62117.61 7794.97 7.97
2013-14 61212.59 7157.74 8.55
2014-15 59745.82 7491.83 7.97
2015-16 56794.47 7802.61 7.28
Source: Table4.10
Creditors Turnover Ratio 8.55 7.97 7.97 7.28
4.99
2011-12 2012-13 2013-14 2014-15 2015-16
Graph 4.10
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Working capital management Apollo Tyres Ltd
Interpretation:
The lower the creditors turnover ratio more beneficial to the company. If the creditors turnover ratio is lower the company gets more time to pay. Here the creditors turnover is highest in the year 2013-14
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Working capital management Apollo Tyres Ltd
11. Average Payment Period
Average Payment Period= Days in a year
Creditors turnover ratio
Table4.11 Average Payment Period
Years No of days in a Creditors turnover Periods (in days) year ratio INR Mn INR Mn INR Mn 2011-12 365 4.99 73
2012-13 365 7.97 46
2013-14 365 8.55 43
2014-15 365 7.97 46
2015-16 365 7.28 50
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Working capital management Apollo Tyres Ltd
Source: Table 4.11
Average Payment Period
73
50 46 46 43
2011-12 2012-13 2013-14 2014-15 2015-16
Graph 4.11
Interpretation: The graph shows that the company efficiently maintained its payment period over the years. Higher APP increases the cash position of the firm. Here is shows relatively higher average payment period so that the company should have good cash position. Keeping creditors unpaid for longer period may affect the operational efficiency of the firm.
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Working capital management Apollo Tyres Ltd
12. Working Capital Turnover Ratio Working capital turnover ratio= Net Sales
Net working capital
Table4.12 Working Capital Turnover Ratio
Years Net sales Net Working Working Capital INR Mn Capital Turnover Ratio INR Mn INR Mn
2011-12 54904.86 5988.51 9.17
2012-13 81578.75 -3115.36 -26.19
2013-14 85074.91 -579.75 -146.74
2014-15 86100.8 -2055.88 -41.88
2015-16 88782.68 -710.32 -124.99
Source: Table 4.12
Working Capital Turnover Ratio 9.17
2011-12 2012-13 2013-14 2014-15 2015-16
-26.19 -41.88
-124.99
-146.74
Graph 4.12
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Working capital management Apollo Tyres Ltd
Interpretation: A higher ratio indicates efficient utilization of working capital an a low ratio indicates otherwise. But a very high working capital turnover is not good for the firm here the working capital ratio shows a fluctuating trend
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Working capital management Apollo Tyres Ltd
13. Current Asset Turnover Ratio Current asset turnover ratio= Net sales
Current Assets
Table4.13 Current Asset Turnover Ratio
Years Net Sales Current Assets Current asset INR Mn INR Mn turnover ratio INR Mn
2011-12 54904.86 18208.07 3.02
2012-13 81578.75 18401.34 4.43
2013-14 85074.91 17351.90 4.90
2014-15 86100.8 20489.46 4.20
2015-16 88782.68 20787.51 4.40
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Working capital management Apollo Tyres Ltd
Source: Table 4.13
Current Asset Turnover Ratio
4.9 4.43 4.4 4.2
3.02
2011-12 2012-13 2013-14 2014-15 2015-16
Graph 4.13
Interpretation: Current asset turnover ratio is higher in the higher in the year 2013-2014 and it is lowest in the year 2011-12. Larger the ratio better the utilization of current asset. Its current asset ratio indicates a positive trend and it shows the efficiency of the company
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Working capital management Apollo Tyres Ltd
14. Net Profit Ratio Net profit ratio= Net profit after tax
Net Sales Table4.14 Net Profit Ratio
Years Net Profit After Net sales Net Profit Ratio Tax INR Mn INR Mn INR Mn 2011-12 1982.53 54904.86 3.61%
2012-13 1813.33 81578.75 2.22%
2013-14 3125.28 85074.91 3.67%
2014-15 4426.19 86100.8 5.14%
2015-16 6450.81 88782.68 7.27%
Source:annual report
Net Profit Ratio
7.27%
5.14%
3.61% 3.67%
2.22%
2011-12 2012-13 2013-14 2014-15 2015-16
Graph 4.14
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Interpretation:
The ratio is used to measure the overall profitability of the business. Higher the ratio better is its operational efficiency of the concern .From the graph, it is clear that the firm is having the highest ratio in the year 2015-16 because of the increase in sale. The net profit of the company is also showing an increasing trend which indicates the overall efficiency of the management.
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15. Changes in Working Capital 2011-12 (INR Mn)
Table4.15 Changes in Working Capital Particulars 2011 2012 Changes in Working Capital Increase Decrease Current Assets Inventories 5527.28 11363.34 5836.06 Trade Receivables 1375.43 2042.80 667.37 Cash& Cash Equivalents 2588.28 1412.63 1175.65 Loans & Advances(short) 2667.95 2111.63 556.32 Other Current Assets 44.18 44.18 Total Current Assets 12203.12 16930.40 Current Liabilities Short Term Borrowings 8360.66 8360.66 Trade Payables 7429.09 7429.09 Other Current Liabilities 6904.60 4810.56 2094.04 Short Term Provisions 1784.88 1817.02 32.14 Total Current 8689.48 22407.33 Liabilities Net Working Capital 3513.64 (5486.93) Decrease in Working 9000.57 Capital Source:anualreport
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16. Changes in Working Capital 2012-13 (INR Mn) Table 4.16 Particulars 2012 2013 Changes in Working Capital Increase Decrease Current Assets Inventories 11363.34 11114.17 249.17 Trade Receivables 2042.80 3639.13 1596.33 Cash& Cash Equivalents 1412.63 1155.93 256.70 Loans & Advances(short) 2111.63 2492.11 380.48 Other Current Assets Total Current Assets 16930.40 18401.34 Current Liabilities Short Term Borrowings 8360.66 7512.52 848.14 Trade Payables 7429.09 8160.85 731.76 Other Current Liabilities 4810.56 4109.42 701.14 Short Term Provisions 1817.02 1733.91 83.11 Total Current 22417.33 211516.70 Liabilities Net Working Capital (5486.93) (3115.36) Decrease in Working 2371.57 Capital Source: Annual Report
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17. Changes in Working Capital 2013-14 (INR Mn) Table 4.17 Particulars 2013 2014 Changes in Working Capital Increase Decrease Current Assets Inventories 11114.17 11208.26 94.09 Trade Receivables 3639.13 3020.06 619.07385.99 Cash& Cash Equivalents 1155.93 1541.92 Loans & Advances(short) 2492.11 1869.66 622.45 Other Current Assets 0.7 Total Current Assets 18401.34 17640.60 Current Liabilities Short Term Borrowings 7512.52 5394.15 2118.37 Trade Payables 8160.85 6000.24 2160.61 Other Current Liabilities 4109.42 4914.33 804.91 Short Term Provisions 1733.91 1911.63 177.72 Total Current 21516.70 18220.35 Liabilities Net Working Capital (3115.36) (579.75) Decrease in Working 2535.61 Capital Source: Annual Report
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18. Changes in Working Capital 2014-15(INR Mn) Table 4.18 Particulars 2014 2015 Changes in Working Capital Increase Decrease Current Assets Inventories 11208.26 12836.92 1628.66 Trade Receivables 3020.06 2405.45 614.61 Cash& Cash Equivalents 1541.92 2211.10 669.18 Loans & Advances(short) 1869.66 2445.80 576.14 Other Current Assets 0.7 590.19 589.49 Total Current Assets 17640.60 20489.46 Current Liabilities Short Term Borrowings 5394.15 1806.73 3587.42 Trade Payables 6000.24 8983.41 2983.17 Other Current Liabilities 4914.33 8907.38 3993.05 Short Term Provisions 1911.63 2847.82 936.19 Total Current 18220.35 22545.34 Liabilities Net Working Capital (579.75) (2055.88) Decrease in Working 1476.13 Capital Source: Annual Report
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19. Changes in Working Capital 2015-16 (INR Mn) Table 4.19 Particulars 2015 2016 Changes in Working Capital Increase Decrease Current Assets Inventories 12836.92 11851.86 985.06 Trade Receivables 2405.45 3200.10 794.65 Cash& Cash Equivalents 2211.10 2078.40 132.70 Loans & Advances(short) 2445.80 1681.19 764.61 Other Current Assets 590.19 1375.96 785.77 Total Current Assets 20489.46 20187.51 Current Liabilities Short Term Borrowings 1806.73 4626.60 2819.87 Trade Payables 8983.41 6621.81 2361.60 Other Current Liabilities 8907.38 5616.92 3290.46 Short Term Provisions 2847.82 4032.50 1184.68 Total Current 22545.34 20897.83 Liabilities Net Working Capital (2055.88) 710.32) Decrease in Working 1345.56 Capital Source: Annual Report Interpretation: From the above tables, it is clear that there is a fluctuating trend in the changes of working capital. In 2012-13 working capital is increased when compared to previous year. During 2013-14 again there is an increase in working capital and in the subsequent year there is dip in working capital and the last year 2015-16 shows an increase in working capital. Net decrease in working capital is due to the excess current liability over current assets. Hence initiatives can be strengthened reducing current liabilities and increasing current assets.
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20. Trend Analysis and Prediction of Sales
Table 4.20
Years Net Sales X X2 XY 2012 54904.86 -2 4 -109810 2013 81578.75 -1 1 -81578.8 2014 85074.91 0 0 0 2015 86100.8 1 1 86100.8 2016 88782.68 2 4 177565.4 Total 396442 72277.69 Source: Annual Report a = Total(y)/n = 396442/5 = 79288.4 b = Total(X*Y)/X2 = 72277.69/10 = 7227.7
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Sales for the next five years
Table 4.21
Years INR Mn 2017 100971.7 2018 108199.5 2019 115427.2 2020 122655 2021 129882.8 Source: annual report
Prediction of Sales
129882.78 122655.01 115427.25 108199.48 100971.71
2016-17 2017-18 2018-19 2019-20 2020-21
Graph 4.15
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21. Trend Analysis and Prediction of Profit
Table 4.22
Years Net Sales X X2 XY 2012 1982.53 -2 4 -3965.06 2013 1813.33 -1 1 -1813.33 2014 3125.28 0 0 0 2015 4426.19 1 1 4426.19 2016 6450.81 2 4 12901.62 Total 17798.81 11549.42 Source: Annual Report a = Total(y)/n = 17798.14/5 = 3559.62 b = Total(X*Y)/X2 = 11549.42/10 = 1154.94
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Profit for the next five years
Years INR Mn 2017 7024.454 2018 8179.396 2019 9334.338 2020 10489.28 2021 11644.22 Table 4.23
Pediction of Profit
11644.22
10489.28
9334.34
8179.4
7024.45
2016-17 2017-18 2018-19 2019-20 2020-21
Graph 4.16
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Working capital management Apollo Tyres Ltd
FINDINGS SUGGESTIONS CONCLUSION BIBLIOGRAPHY
5.1 FINDINGS
1 a. Networking Capital For Five Years:In the year 2011-12, The Net working capital of the company is 5998.51, which is a good position to be. But in the following year the graph shows a sudden decrease that is in the 2012-13 the NWC goes down to -3115.36 and in 2013-14 the NWC come up to -579.75, from where in 2014-15 it again drop to -2055.88 and then in the year 2015- 2016 it comes -710 it should be noted that by this there is an current liability b. Current Ratio:In an ideal current ratio current asset should be twice the current liabilities. In the year 2011-12 the current ratio is at 1.49. But the later year there is a declining trend in 2012-13 current ratio goes down to 0.86 and from there in the next year 2013-14 it rises up to 0.97 again it goes down to 0.91 in the 2014-15. In the last year 2015-16 ratio again goes up and shows a growth by 0.6 and becomes 0.97. After the year 2012-13 the ratio in the improving position c. Quick Asset Ratio:In the year 2011-12 the quick asset ratio of the firm is 0.56 and compared to the later year it is a good position. But in the following years 2012-13, 2013-14 and 2014-15 the ratio is constant at 0.34 in the year 2015-16 it again goes up to 0.40 even though a constant ratio is expected. d. Absolute Liquid Ratio:The graph shows that the ratio is below standards. 0.39 is the ratio which company shows in the year 2011-12 and by far it is the highest. In the following years the ratio shows a declining trend and it reaches 0.17. In the year 2011-12 and from there it becomes 0.19 in 2012-13 and 0.23 in 2013-14, as it shows a increasing pattern it becomes 0.25 in 2014-15
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Working capital management Apollo Tyres Ltd e. Cash Ratio:In the year 2011-12 the cash ratio stands at a point of 0.12 which is the highest between the five years, the ratio of 2012-13 is 0.05 and 0.09 is the ratio of the year 2013-14, by 2014-15 it has risen up to 0.10 and thus it can be said that it shows a rising trend. f. Inventory Turnover Ratio:Inventory Turnover Ratio of the company in the 2011-12 is 4.83. Which are relatively low, 7.34 is the ratio shown in the year 2012-13 and 7.59 at in 2013-14.which shows that ratio can be further enhanced but in 2014-15 it goes down to 6.71 and again rises up to 7.49 in 2015-16 g. Inventory holding period: Comparatively the inventory holding period shows a decreasing trend which is a good sign 76 days was the period taken in 2011-12 and bye 2012-13 it came down to 48 days but a slight increase has been their in the year 2014-15 which was 54 days in the later year days again declined to 49 in 2015-16 h.Debt turnover ratio:32:12 in the year 2011-12 was the lowest ratio recorded which should have given a better position for the company 22:72 in 2012-13 and 26:71 in 2013-14 showed a decreasing trend But in 2014-15 the company again managed to acquire a ratio of 31:74 and 31:68 in the year 2015-16 i. Average collection period:In the year 2011-12 average collection period is 11.36. There has been slight changes in the following years In 2012-13 12.71 and in 2013-14 13.67 was the ratio recorded. The former two year showed an increasing trend which was 11.50 in 2014-15 and and 11.52 in 2015-16 it indicate that the firm hasn’t got a liberal credit policy j. Creditors turnover ratio: If the ratio is lower the company gets more time to pay the lowest ratio which was recorded in the year 2011-12 was 4.99 ,and
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Working capital management Apollo Tyres Ltd highest was in 2013-14 which was 8.55 remaining 3 years showed almost same ratioIn 2012-13 and 2014-15 the ratio was 7.97 and 2015-16 showed a ratio of 7.28 the ratio here shows a varying trend k. average payment period: 73 days taken in the year 2011-12 is the highes app of the company which is a better cash position. Even though there has been variation company managers to a good cash position . In 2012-13U2014- 15 the app was 46 only 43 days was taken in 2013-14.In 2015-16 the number of days was 50.It the creditors are kept unpaid for longer period it may affect the operational efficiency. l. Working capital turnover ratio: India 2011-12 the working capital turn over issue is 9.17 which is a higher ratio in the coming year it went turn as in 2012- 13 the ratio was -26.19. 2013-14 showed a ratio of -146.74 which is lowest of the more -41.88 was shown in the year 2014-15 and -12,-199 in the year 2015- 16. Higher ratio indicates efficient utilization. Here the graph shows a fluctuating trend. m. Current asset turnover ratio:From the year 2011-12 which indicated a ratio of 3.02 the other year have shown a higher trend and larger the ratio the better for the company. 2012-13 showed a ratio of 4.43. 4.90 was the ratio in 2013-14 which was the highest. The later two years also showed a positive sign is 4.20 in 2014-15 and 4.40 in 2015-16 n. Net profit ratio:2.22 % in the year 2012-13 was the lowest ratio recovered. The year 2011-12 had a ratio of 3.61% and 2013-14 had 3.67%. Which was a normal stage considerably. The later two years showed an increasing trend which was recorded as 5.14% in 2014-15 and 7.27 % in 2015-16 it is due to an increase in sale. This indicates the overall efficiency of the management.
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Working capital management Apollo Tyres Ltd
5.2 SUGGESTIONS
For improving the efficient working capital of the company the following suggestion are made.
1. The company must maintain adequate working capital. 2. The current ratio and quick ratio of the firm can be further enhanced to the optimum level for the effective utilization of funds. 3. The firm should take proper measures in enhancing the utilization of fixed assets for generating sales. 4. The company’s sales promotional activities shall be further enhanced. 5. The dependence on total liability should be reduced to achieve a healthy solvency ratio. 6. More investments should be made for Research & Development programs. 7. It is profitable for the company to invest more in current assets than in fixed assets. 8. Management should take necessary steps to monitor the constant increase of current liabilities. 9. The company can further enhance its profit by improving sales, debtor’s collection and optimizing costs.
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Working capital management Apollo Tyres Ltd
5.3 CONCLUSION
The project report on the topic “Working Capital Management Of The Apollo Tyres Ltd.” gave the researcher a deep knowledge about the various functional areas and practical problems faced in the working capital and overall financial management of the company.
This study aimed at analyzing the ratios in working capital management and the relationship between working capital and liquidity variables. It also finds the effectiveness and efficiency of a financial management in the organization and suggest ways and means to improve the financial health of the company.
The study can be conclude that the company is in a better position and have a glowing future. The suggestions based on the study will enable the firm to improve its performance in the coming years.
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Working capital management Apollo Tyres Ltd
BIBLIOGRAPHY
1. Text Book Reference Maheswari S N. Financial Management Principles & Practices, New Delhi, Sultan Chand & Sons, 1997. I M Pandey, Financial Management, New Delhi, Vikas Prasanna Chandra, Financial Management, Principles & Practice, Tata Mc Graw Hill, New Delhi, 1994 R K Sharma & Shashi K Gupta, Management Accounting, Meerut, Kalyani Publications 2001 Sinha K P, Sinha A K and Singh SC, Management of Working capital in India, JanakiPrakash, New Delhi Research Methodology and Statistical Analysis, IGNOU, Study Material S P Jain, K I Narang(2012), Accounting for Management, Kalyani Publishers.
2. Reference Material Annual Report Company Manual
3. Websites www.apollotyres.com
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Working capital management Apollo Tyres Ltd
ANNEXURE
Balance Sheet of Apollo Tyres ------in Rs. Cr. ------Mar '16 Mar '15 Mar '14 Mar '13 Mar '12
12 mths 12 mths 12 mths 12 mths 12 mths
Sources Of Funds
Total Share Capital 50.90 50.91 50.41 50.41 50.41
Equity Share Capital 50.90 50.91 50.41 50.41 50.41
Share Application Money 0.00 0.00 10.78 10.78 0.00
Reserves 3,942.38 3,216.65 2,675.51 2,277.12 1,994.07
Networth 3,993.28 3,267.56 2,736.70 2,338.31 2,044.48
Secured Loans 244.79 370.30 743.89 1,088.41 1,348.71
Unsecured Loans 341.51 426.30 150.51 789.37 664.53
Total Debt 586.30 796.60 894.40 1,877.78 2,013.24
Total Liabilities 4,579.58 4,064.16 3,631.10 4,216.09 4,057.72
Mar '16 Mar '15 Mar '14 Mar '13 Mar '12
12 mths 12 mths 12 mths 12 mths 12 mths
Application Of Funds
Gross Block 5,153.74 4,899.98 4,776.72 4,358.47 3,930.25
Less: Revaluation Reserves 3.12 3.12 3.12 3.12 3.12
Less: Accum. Depreciation 2,052.43 1,792.93 1,523.14 1,287.12 1,079.62
Net Block 3,098.19 3,103.93 3,250.46 3,068.23 2,847.51
Capital Work in Progress 386.87 129.65 34.97 248.97 310.66
Investments 793.75 751.92 651.46 612.70 562.65
Inventories 1,022.90 1,185.19 1,283.69 1,120.83 1,111.42
Sundry Debtors 292.76 320.01 240.55 273.14 363.91
Cash and Bank Balance 289.38 207.84 221.11 154.19 115.59
Total Current Assets 1,605.04 1,713.04 1,745.35 1,548.16 1,590.92
Loans and Advances 987.02 419.76 426.64 356.03 454.62
Total CA, Loans & Advances 2,592.06 2,132.80 2,171.99 1,904.19 2,045.54
Current Liabilities 1,748.26 1,643.03 2,186.24 1,426.91 1,535.25
Provisions 543.01 411.09 291.54 191.09 173.39
Total CL & Provisions 2,291.27 2,054.12 2,477.78 1,618.00 1,708.64
Net Current Assets 300.79 78.68 -305.79 286.19 336.90
Total Assets 4,579.60 4,064.18 3,631.10 4,216.09 4,057.72
Contingent Liabilities 563.18 151.52 253.25 748.98 411.32
Book Value (Rs) 78.45 64.19 54.08 46.18 40.56
Source : Dion Global Solutions Limited
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Working capital management Apollo Tyres Ltd
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Balance Sheet of Apollo Tyres ------in Rs. Cr. ------Mar '16 Mar '15 Mar '14 Mar '13 Mar '12
12 mths 12 mths 12 mths 12 mths 12 mths
Sources Of Funds
Total Share Capital 50.90 50.91 50.41 50.41 50.41
Equity Share Capital 50.90 50.91 50.41 50.41 50.41
Share Application Money 0.00 0.00 10.78 10.78 0.00
Reserves 3,942.38 3,216.65 2,675.51 2,277.12 1,994.07
Networth 3,993.28 3,267.56 2,736.70 2,338.31 2,044.48
Secured Loans 244.79 370.30 743.89 1,088.41 1,348.71
Unsecured Loans 341.51 426.30 150.51 789.37 664.53
Total Debt 586.30 796.60 894.40 1,877.78 2,013.24
Total Liabilities 4,579.58 4,064.16 3,631.10 4,216.09 4,057.72
Mar '16 Mar '15 Mar '14 Mar '13 Mar '12
12 mths 12 mths 12 mths 12 mths 12 mths
Application Of Funds
Gross Block 5,153.74 4,899.98 4,776.72 4,358.47 3,930.25
Less: Revaluation Reserves 3.12 3.12 3.12 3.12 3.12
Less: Accum. Depreciation 2,052.43 1,792.93 1,523.14 1,287.12 1,079.62
Net Block 3,098.19 3,103.93 3,250.46 3,068.23 2,847.51
Capital Work in Progress 386.87 129.65 34.97 248.97 310.66
Investments 793.75 751.92 651.46 612.70 562.65
Inventories 1,022.90 1,185.19 1,283.69 1,120.83 1,111.42
Sundry Debtors 292.76 320.01 240.55 273.14 363.91
Cash and Bank Balance 289.38 207.84 221.11 154.19 115.59
Total Current Assets 1,605.04 1,713.04 1,745.35 1,548.16 1,590.92
Loans and Advances 987.02 419.76 426.64 356.03 454.62
Total CA, Loans & Advances 2,592.06 2,132.80 2,171.99 1,904.19 2,045.54
Current Liabilities 1,748.26 1,643.03 2,186.24 1,426.91 1,535.25
Provisions 543.01 411.09 291.54 191.09 173.39
Total CL & Provisions 2,291.27 2,054.12 2,477.78 1,618.00 1,708.64
Net Current Assets 300.79 78.68 -305.79 286.19 336.90
Total Assets 4,579.60 4,064.18 3,631.10 4,216.09 4,057.72
Contingent Liabilities 563.18 151.52 253.25 748.98 411.32
Book Value (Rs) 78.45 64.19 54.08 46.18 40.56
Source : Dion Global Solutions Limited